The Company reported a net loss of approximately $1,033,000, or $0.01 per share for the three months ended December 31, 2015. This compares to a net loss of $698,000, or $0.01 per share, for the three months ended December 31, 2014. The increase in net loss was partially attributable to non-cash interest expense related to the note payable with a redemption liability completed in September 2015 and retired in December 2015.

"During the quarter, we completed the necessary work to file our response to the clinical hold placed on our Investigational New Drug Application ("IND") for the lung syndrome of acute radiation exposure ("Lung-ARS") by the Medical Imaging Products Division ("DMIP") of the U.S. Food and Drug Administration ("FDA") and in January 2016 submitted a formal response to the FDA," stated John L. McManus, President and Chief Executive Officer. "We also raised sufficient capital to fund the work necessary for the filing of Investigational New Drug Applications for two new compounds, one for the treatment of Parkinson's disease and one for the treatment of Cystic Fibrosis and infectious disease. This capital will also fund initial human studies of AEOL 10150 in Idiopathic Pulmonary Fibrosis and radiation therapy for cancer."

Results of Operations for the Three Months Ended December 31, 2015

Revenue for the three months ended December 31, 2015 was approximately $305,000, versus revenue of $925,000 for the three months ended December 31, 2014. The revenue is from the Lung ARS medical countermeasure development contract with the Biomedical Advanced Research and Development Authority ("BARDA"), a division of the U.S. Department of Health and Human Services. Lower revenue in 2015 reflects the timing of the initiation of program items and revenue recognition under accounting rules.

Research and development expenses decreased to approximately $492,000 for the three months ended December 31, 2015, from approximately $973,000 for the three months ended December 31, 2014. The decrease in 2015 expenses reflects both the timing of program items under the BARDA contract and expense recognition under accounting rules.

General and administrative expenses were approximately $561,000 for the three months ended December 31, 2015 compared to approximately $650,000 for the three months ended December 31, 2014.

As of December 31, 2015, the Company had approximately $5,444,000 in cash and cash equivalents and 151,559,745 common shares outstanding. The Company had accounts receivable of $871,000 and accounts payable of $796,000 on December 31, 2015.

Aeolus has filed today with the SEC its Quarterly Report on Form 10-Q for the quarter ended December 31, 2015. Aeolus urges its investors to read this quarterly filing as well as its Annual Report on Form 10-K, also filed with the SEC, for further details concerning the Company. The Quarterly Report on Form 10-Q and the Annual Report on Form 10-K are also available on the Company's website, at www.aolsrx.com.

About AEOL 10150

AEOL 10150 is a broad-spectrum catalytic antioxidant specifically designed to neutralize reactive oxygen and nitrogen species. The neutralization of these species reduces oxidative stress, inflammation, and subsequent tissue damage-signaling cascades resulting from radiation exposure. AEOL 10150 may have a profound beneficial impact on people who have been exposed, or are about to be exposed, to high-doses of radiation in the treatment of oncology.

AEOL 10150 has performed well in animal safety studies, was well tolerated in two human clinical trials and has demonstrated statistically significant survival efficacy in multiple Radiation-Induced Lung Fibrosis ("Lung ARS") studies in animals. The Company believes it could have a profound beneficial impact on people who have been exposed, or are about to be exposed, to high-doses of radiation, whether from cancer therapy or a nuclear event. Aeolus has received "Orphan Drug" designation for the use of AEOL 10150 in treating Lung ARS and Idiopathic Pulmonary Fibrosis and has filed an IND to allow for human safety testing of the compound in healthy volunteers. AEOL 10150 is also currently in development for use in Idiopathic Pulmonary Fibrosis and as both a therapeutic and prophylactic drug in cancer patients.

About Aeolus Pharmaceuticals

Aeolus Pharmaceuticals is developing a platform of novel compounds, known as metalloporphyrins, for use in biodefense, fibrosis, oncology, infectious disease and diseases of the central nervous system. Its lead compound, AEOL 10150, is being developed, with funding from the US Department of Health and Human Services, as a medical countermeasure against chemical and radiological weapons, where its initial target indications are as a protective agent against the effects of acute radiation syndrome and delayed effects of acute radiation exposure. Aeolus' strategy is to leverage the substantial investment in toxicology, manufacturing, and preclinical and clinical studies made by US Government agencies in AEOL 10150 to develop the compound for the treatment of lung fibrosis, including idiopathic pulmonary fibrosis ("IPF") and as a treatment to reduce side effects caused by radiation toxicity and improve local tumor control in cancer therapy. The Company is also developing AEOL 11114 as a treatment for Parkinson's Disease and AEOL 20415 as a treatment for cystic fibrosis and diseases that have developed a resistance to existing antibiotic and anti-viral therapies. For more information, please visit Aeolus's corporate website at www.aolsrx.com.

Forward-Looking Statements

The statements in this press release that are not purely statements of historical fact are forward-looking statements. Such statements include, but are not limited to, those relating to Aeolus' product candidates, as well as its proprietary technologies and research programs, a potential phase 1 study in healthy normal volunteers, the BARDA Contract, and the expected use of proceeds from the financing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Aeolus' actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Important factors that could cause results to differ include risks associated with uncertainties of progress and timing of clinical trials, scientific research and product development activities, difficulties or delays in development, testing, obtaining regulatory approval, the need to obtain funding for pre-clinical and clinical trials and operations, the scope and validity of intellectual property protection for Aeolus' product candidates, proprietary technologies and their uses, and competition from other biopharmaceutical companies, and whether BARDA exercises one or more additional options under the BARDA Contract. Certain of these factors and others are more fully described in Aeolus' filings with the Securities and Exchange Commission, including, but not limited to, Aeolus' Annual Report on Form 10-K for the year ended September 30, 2015. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

Series A nonredeemable convertible preferred stock, 1,250,000 shares authorized as of December 31, 2015 and September 30, 2015, respectively; no shares issued and outstanding as of December 31, 2015 and September 30, 2015, respectively

-

-

Series B nonredeemable convertible preferred stock, 1,600,000 shares authorized as of December 31, 2015 and September 30, 2015, respectively; 526,080 shares issued and outstanding as of December 31, 2015 and September 30, 2015, respectively

5

5

Series C nonredeemable convertible preferred stock, 5,000 and zero shares authorized as of December 31, 2015 and September 30, 2015, respectively; 4,500 and zero shares issued and outstanding as of December 31, 2015 and September 30, 2015, respectively

Common stock, $.01 par value per share, 200,000,000 shares authorized; 151,559,745 and 135,930,068 shares issued and outstanding as of December 31, 2015 and September 30, 2015, respectively

1,515

1,359

Additional paid-in capital

191,760

184,421

Accumulated deficit

(187,663

)

(184,630

)

Total stockholders' equity (deficit)

5,617

(845

)

Total liabilities and stockholders' equity (deficit)

$

6,413

$

1,777

AEOLUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

Three Months Ended December 31,

2015

2014

Revenue:

Contract revenue

$

305

$

925

Costs and expenses:

Research and development

492

973

General and administrative

561

650

Total costs and expenses

1,053

1,623

Loss from operations

(748

)

(698

)

Interest expense

285

-

Net loss

(1,033

)

(698

)

Deemed dividend on Series C preferred stock

580

-

Net loss attributable to common stockholders

$

(1,613

)

$

(698

)

Net loss per weighted share attributable to common stockholders:

Basic net loss per common share

$

(0.01

)

$

(0.01

)

Diluted net loss per common share

$

(0.01

)

$

(0.01

)

Weighted average common shares outstanding:

Basic

139,439

135,850

Diluted

139,439

135,850

AEOLUS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Three Months Ended December 31,

2015

2014

Cash flows from operating activities:

Net loss

$

(1,033

)

$

(698

)

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of discount on note payable to shareholders

273

-

Accrued interest

12

Noncash compensation

38

191

Change in assets and liabilities:

Accounts receivable

714

(253

)

Deferred subcontractor cost

21

2

Prepaid expenses and other current assets

(21

)

(19

)

Accounts payable and accrued expenses

(802

)

(291

)

Deferred revenue

(22

)

(2

)

Net cash used in operating activities

(820

)

(1,070

)

Cash flows from financing activities:

Proceeds from issuance of common stock and common stock warrants, net

2,005

-

Proceeds from issuance of preferred stock and common stock warrants, net

4,165

-

Net cash provided by financing activities

6,170

-

Net increase (decrease) in cash and cash equivalents

5,350

(1,070

)

Cash and cash equivalents at beginning of period

94

1,517

Cash and cash equivalents at end of period

$

5,444

$

447

Supplemental disclosure of non-cash financing activities:

Conversion of note payable to shareholders for common stock and warrants

$

1,000

$

-

Conversion of accrued interest on note payable to shareholders for common stock and warrants